I attended the Invest Fair last Sunday with the primary aim of seeing and hearing John Lim of ARA. This is main event of the day where Diana Ser is the Host and John Lim as the speaker. I had blogged about John Lim earlier. Refer link here. Seeing John Lim in person, and hearing his speech is no difference from what I blogged about him earlier. Honest, down to earth, humble, non-pretentious despite his status of today.
John Lim's Investment Philosophy
- do not speculate and over leverage
- focus on fundamentals of company
- he focus on stocks he is most familiar with and do not over diversification
- he is still holding stocks he bought 30 yrs ago and accumulate more of those shares over years
- Be patient and not dream of overnight success
John Lim's Life Philosophy
When asked why Li Ka-Shing choose him? Lim said he does not know, but maybe he is honest and uphold his integrity.
In his life, he always maintains this principle:
John Lim’s Entrepreneurship
Lim cited an example that "Many young entrepreneurs of today, who just set up cafeteria is not really considered entrepreneurism!"
Entrepreneurship is about:
- building personal competence
- stay focus over many years
- 信誉 integrity and reputation
- reputation is about priorities
- understand the approach to business
- ability to calculate risk
Lim said he wanted to build a company not just to make money but one which can be sustainable for a long time even if he is not around anymore. He is very passionate in his job and will work as long as he is possible to carry on working. Lim also believe that eventually, a sustainable business needs to be professionally managed.
For ARA, the motto is: “investors first, shareholders second, and staffs third.
For Most of the speech, John Lim focus on promoting Reits to the local retail investors. Some Q & A as follows?
Q: Views on Interest Rates Increase
John mentioned that never in his more than 30 years career has he seen interest rate so low for so long. This is to say, almost everyone in the financial market already knows that interest is going to rise and Reits is going to be affected adversely, way beforehand. Therefore it seems that for most of the Reits, the pessimism is already priced in.
Q: E-Commerce threat to retail Reits
Yes, he agrees that you cannot ignore online commerce impact, but he believes retail Reits will evolve over time. For instance, Suntec after AEI, has more F&B rather than retail. And maybe over time, retailers may work closely with e-commerce owners to come out with a win-win strategy.
Also while online market purchase is convenient, people still require a place to meet their friends, to eat, family outing etc. He said “You cannot do your massage or manicure online right?" Hence maybe retail Reits in future will cover more F&B, education, entertainment, body relaxation, etc
Example: Many years ago when VCD was introduced, he mentioned people told him that Cinema business will be badly hit. But he quipped "Look at the queues at GV today and the price of tickets they are charging!"
Ultimately, it's about keeping up with changes and transforming the Reits businesses accordingly.
Q: Reits cannot keep increasing rents right. Then how to grow?
John mentioned that Reits have to diversify and transform within itself.
Using an example of Carrefour Supermarket in Suntec.
Let’s say that Carrefour Supermarket many years ago signed agreement at $4 per sqft for 100k sqft for 12 years with Suntec. Not only the rent is cheap back then, Carrefour also occupied the prime areas of Level 1 in Suntec.
For some reasons not mentioned to the public, he further said that Carrefour vacated. Today, Suntec rented only it’s basement floor to Giant Supermarket at double the rent. In effect, even at this price, it is still reasonable for market standard. Yet, now areas at level one can now lease to as many as 25 retailers or more, at $10-15 per sqft.
Other growth areas, includes venturing overseas, just like Suntec’s acquisition of Pacific Highway Tower in Sydney.
Q: What is ARA acquisition criteria for Reits
ARA will use commonly the below 3 criteria
1. focus of the business of the Reits
2. Yield accretive
3. reasonable valuation (most impt)
For example, Suntec initially wanted to own all towers of MBFC. However, eventually it was decided that they only bid to own one tower. Reason being the price is considered to be too high for them at that time.
Rolf’s Final Thoughts
The face to face session with CEO of ARA further fortifies my confidence in holding on to the shares of his company.
PS: At time of writing, I own shares in ARA.